Layoffs in Structural-Historical Perspective

Abstract

This paper describes a “trimming the fat” account of restructuring in which firms lay off the least productive employees in a job, and a “broken contract” account in which firms lay off highly paid employees in a job. Analyses of personnel files of a Fortune 500 manufacturing firm that restructured multiple times reveal that the firm laid off high-paid and low-performing managers during the 1980s and low-performing managers in the 1990s. These patterns stem from the firm’s increasing use of pay-for-performance from the late 1980s onward and from differences in the institutional contexts in which the restructurings occurred.